High drug prices can make effective treatments inaccessible, forcing people to delay or forgo care. Most Favored Nation (MFN) drug-pricing policies attempt to address this by tying Medicare prices or payments to lower prices abroad. However, this reduces the expected return on drug development and risks trading immediate government savings for fewer future treatment options. While MFN directly impacts Medicare patients, manufacturers may also seek to recover lost revenue through higher private-market prices, shifting costs to other patients.
The Centers for Medicare & Medicaid Services (CMS) has finalized its Global Benchmark for Efficient Drug Pricing model (GLOBE). The model requires manufacturers to pay rebates to Medicare when covered drug prices exceed an international benchmark calculated from drug prices in selected countries. These payments reduce what Medicare pays and manufacturers retain from sales, but savings do not go to patients.
A better approach that would benefit patients would be to reduce the cost of developing and supplying medicines while making competing treatments easier to buy. Congress should end federal controls on manufacturers’ drug prices, including MFN requirements such as GLOBE and Medicare’s separate drug-price negotiation program, and replace them with reforms that strengthen competition.
GLOBE and Its Problems
The GLOBE model begins on January 1, 2027, with patient payment changes starting in April. It is a geographically limited test: CMS will select areas representing about one-quarter of people whose primary coverage is Original Medicare. It applies to selected drugs without competing generic or biosimilar versions under Medicare Part B, including physician-administered treatments for cancer, immune disorders, and eye disease.
That focus on drugs without competition explains the exclusion of biosimilars, highly similar alternatives to biologic medicines with no clinically meaningful differences from the original product. Once a biosimilar reaches the U.S. market, GLOBE excludes both it and the original biologic. According to CMS, this avoids disrupting competition.
The final rule also exempts medicines approved only for designated rare diseases, treatments made from donated blood or plasma, and specified cell and gene therapies, including some cancer treatments. CMS excluded them as a precaution after concerns that the model could disrupt supply or access. Patients retain coverage under existing Medicare rules, but these medicines do not qualify for GLOBE’s reduced coinsurance.
For included drugs, CMS uses foreign prices to calculate the benchmark for the rebate. It starts with the higher available figure from two methods: an estimate of the lowest price in selected countries, or an average weighted by sales volume using manufacturer-submitted data. Foreign prices determine manufacturers’ rebate obligations to Medicare.
However, Medicare savings should not be confused with patient savings. Manufacturers send the rebates to Medicare; patients’ bills are determined separately. GLOBE can reduce coinsurance, the patient’s percentage share of covered costs, while Medicare pays more to keep the provider’s total payment unchanged. In CMS’s example, a $100 treatment that normally costs the patient $20 and Medicare $80 instead costs the patient $10 and Medicare $90. The provider still receives $100. Medicare saves only if the additional manufacturer rebate exceeds the extra $10 it pays the provider, holding other costs constant. A patient paying that bill saves $10. If the patient has supplemental insurance to cover their share, the immediate saving goes to that insurer.
Preserving provider payments helps avoid an immediate disruption to treatment. But it fails to prevent a similar disruption on the drug development side.
A mandatory rebate reduces revenue without reducing the cost of discovery, clinical trials, or production. Investors weigh a drug’s expected returns against development costs and the risk of failure. Reducing those returns can make a previously viable project no longer worth pursuing. Fewer projects will justify the investment, leaving future patients with fewer treatment options.
A 2010 study comparing European and American drug companies illustrates this concern. The researchers found lower profits and research spending among European firms facing more extensive price regulation. Their model estimated 46 fewer new medicines from EU firms over the 19 years studied and 117 fewer U.S. medicines if similar controls had been applied during the same time period.
Patients with diseases that remain difficult to treat have a large stake in those investment decisions. Their need for better treatments belongs in the affordability discussion alongside the needs of patients buying medicines today.
The same lost revenue also creates pressure to recover profits from privately insured patients. Where competition and contracts permit, manufacturers may seek higher prices or offer smaller discounts to private insurers, potentially raising premiums or patients’ prescription costs. That response could preserve some investment by shifting costs to other patients. Reducing development costs and opening markets to competing treatments offers a better route to affordable care.
The Competitive Solution
Patients need relief today without losing tomorrow’s treatment options. Congress should end MFN requirements, including GLOBE, and pair that change with reforms that help medicines reach patients. The practical agenda is:
- Reduce unnecessary development costs for generics and biosimilars. The stakes are substantial: the Food and Drug Administration (FDA) reports that biologics account for about 5 percent of prescriptions but 51 percent of drug spending.
The FDA’s March 2026 draft guidance would streamline approvals by letting a biosimilar developer use a comparable existing study showing how a body processes the medicine, from a foreign-approved product without automatically requiring a separate study demonstrating the same process for approval in the U.S. The developer would still have to demonstrate the biosimilar meets the FDA’s standards. This simply removes duplicate testing. The agency estimates savings of up to half of those study costs, or about $20 million. The FDA should carry this approach into final guidance and practice while preserving safety and effectiveness standards.
- Remove the extra barrier to biosimilar substitution. The “interchangeable” designation, which applies to some biosimilars, allows pharmacists to substitute select biosimilars for the original biologic without first contacting the prescriber, subject to state law. Other approved biosimilars meet the same high safety and effectiveness standard but lack the substitution designation, reducing patient access to more affordable medicines.
There has been some progress already. The FDA has moved away from routinely requiring additional switching studies, which test patients’ responses when alternating between products, for the legal designation. In 2024, most interchangeable biosimilars approved by then had not needed those studies. But reducing study requirements leaves the separate legal designation in place. Congress should remove that additional designation and make FDA-approved biosimilars automatically interchangeable with their brand-name counterpart, with states also aligning their substitution laws. That would let pharmacists offer approved alternatives without requiring manufacturers to obtain a second designation.
- Align provider payments with appropriate lower-cost treatment. Percentage-based drug payments can generate a larger dollar payment for a more expensive medicine, weakening the financial incentive for a physician to choose a cheaper alternative.
Medicare’s enhanced add-on for qualifying biosimilars gives providers a larger payment above the biosimilar’s average sales price to encourage its use. For five years, the add-on is 8 percent of the original biologic’s average sales price, instead of the normal 6 percent. The benefit is that a larger add-on can accompany a lower total drug payment. For example, if the original biologic’s average sales price is $1,000 and the biosimilar’s is $800, the formulas produce total payments of $1,060 and $880, respectively. Providers receive a larger add-on ($80 compared to $60) for choosing the less expensive medicine, while the total payment falls. Other physician-administered drug payments, including Medicare Part B payments for cancer infusions and private insurance payments to doctors’ offices and hospital outpatient departments, should follow the same approach.
- Pay pharmacy benefit managers (PBMs) for service rather than higher prices. PBMs manage prescription benefits and negotiate drug prices for insurers. Compensation tied to a drug’s price or rebate can favor a costly product with a large rebate over a cheaper alternative.
Congress has already enacted reforms for Medicare Part D, the program’s prescription drug coverage, beginning in 2028. The law generally requires fixed fees reflecting the value of PBM services instead of compensation tied to drug prices or rebates. States should pursue similar measures within their authority before 2028, using the federal reforms as a guide.
- Make direct purchasing a practical choice. For pharmacy-dispensed medicines, paying a manufacturer or pharmacy directly can sometimes cost less than using insurance. Transparent cash prices would let patients compare that option with their insured payment, choose the better deal, and require PBMs to demonstrate the value of their services.
- Remove barriers to deeper discounts. Medicaid’s Best Price rule can make a manufacturer pay larger rebates to state Medicaid programs when it gives a sufficiently deep discount to a private buyer. The additional rebates apply to Medicaid purchases of that drug, so one private discount can create a much larger repayment obligation. That wider rebate obligation makes some private discounts more costly to offer.
Federal rules already exclude direct patient sales and certain patient discounts from the calculation. Congress should expand the exemptions for qualifying discounts or repeal Best Price to remove the link between covered private discounts and wider Medicaid rebate obligations.
- Give legitimate cash discounts clear legal protection. The federal Anti-Kickback Statute prohibits knowingly and willfully offering something of value to induce business paid for by federal healthcare programs. A manufacturer’s cash discount can raise legal concerns if it is used to attract patients to another drug that Medicare or Medicaid will pay for, or to start patients on a drug that the program is expected to pay for later. Clear protection for qualifying cash discounts would let manufacturers offer lower prices without having to navigate that uncertainty.
The Department of Health and Human Services should establish a safe harbor that gives qualifying discount arrangements explicit legal protection. Its inspector general’s January 2026 bulletin identifies lower-risk manufacturer cash sales, including conditions against insurance billing and tying discounts to future purchases. A safe harbor would turn that guidance into a defined legal protection for arrangements that meet its conditions. Congress could reinforce that protection in law and expand the qualifying arrangements.
- Count eligible cash purchases toward Part D’s out-of-pocket limit. Part D is Medicare’s prescription drug coverage, generally for medicines filled at a pharmacy. Once an enrollee’s qualifying spending reaches the annual limit, covered Part D prescriptions carry no further out-of-pocket charge for the year. Purchases under the bulletin’s cash-sale framework occur outside insurance and do not count toward it. A cheaper cash purchase can therefore save money today without reducing what the patient must still pay before reaching the cap.
Congress should allow documented actual payments for otherwise eligible cash purchases to count, with accurate records and safeguards against double counting. Cash discounts and Medicare coverage should work together.
- Expand pharmacy choice across state lines. States should recognize appropriately licensed out-of-state pharmacies for online sales while maintaining patient protections. Broader access would give patients more prices to compare, with clear information on both immediate costs and whether purchases count toward an insurance spending limit.
These reforms would help competing medicines reach patients, reward choices that lower costs, and preserve the opportunity to earn a return from developing useful medicines.
High drug prices can prevent access today. Policies that discourage future treatments can close off options tomorrow. Patients should not have to accept either failure. Congress should replace MFN pricing with a competition agenda that makes effective medicines easier to afford and gives patients more opportunities to benefit from medical progress.
Justin Leventhal is a Senior Policy Analyst for the American Consumer Institute, a nonprofit education and research organization that advocates for consumers through evidence-based analysis and data. Follow Justin on X @JustinLeventhal